The EUR/USD pair tried to rally during the Thursday session, but failed once we got closer to the 1.33 handle again. This is the second shooting star in a row on the daily chart, and it does suggest that the Euro is running into trouble. However, we are above the previous resistance level at 1.3150, and this is something that we give great weight as the breakout was so difficult.
With. These two candles, it suggests to us that this market is ready to pullback. Whether or not 1.3150 holds as support is a completely other conversation, but we have reason to believe looking at the longer-term history of this level that it is indeed strong support.
Things in Europe seem to be moving along much better than they had been previously, and this is especially true when you look at the bond markets. The yields in such countries as Greece and Spain have come down drastically, and this of course has the market much more comfortable with parking as money in Europe. Adding to this was the amazing upgrade by Moody’s of Greek debt just 48 hours ago. This was something that we thought would take years to turn around, and quite frankly we are surprise that the Greeks have pulled off as much is they have already.
Because of this, it appears that the euro is set to go higher overall, but this looks like a fairly significant resistance going up to the 1.34 handle. It isn’t until we get above that that we feel clear sailing has come, and because of that we figure that a lot of the move higher will be very choppy. These to shooting stars in a row are a perfect example of this kind of choppiness that we expect, and as a result we think that waiting for the pullback to 1.3150 will be the trade to take. If we can get a proper supportive candle near that level, we are more than willing to go long. Alternately, if we managed to break the highs of both Wednesday and Thursday, we would think that is a very bullish sign as well.
Written by FX Empire